Transparency and integrity of Environmental, Social and Governance (ESG) rating activities

IOSCO final report on ESG ratings published in Nov 2021 describes (p. 20): a lack of reporting can either lead providers to use industry averages, thereby possibly creating an incentive for poor performers not to report their information, or lead the provider to negatively assess the company. This common market practice calls industry averages or proxies, when they are simply fake data.

Regulating the ESG industry is overdue given its increasing use clear evidence of grave and fundamental problems, and the serious abuse and confusion about what ESG ratings mean. The proposed Regulation will only tackle part of the problems by requiring more and better transparency, general quality requirements, measures to deal with conflicts of interest and inadequate corporate governance, as well as…

BETTER FINANCE position and recommendations The draft Regulation urgently needs to: expand protection provisions for retail investors against greenwashing; establish a minimum sustainability requirement for ESG ratings to ensure certain degree of harmonisation between providers going beyond transparency of methodology; include a requirement which can address conflicts of interest by integrating clearly labelled…

Scope Group welcomes the European Commissions initiative to regulate the ESG rating market and improve transparency. We believe that this will help establish credibility to investing aligned with ESG goals and contribute to tackling greenwashing practices. The Commissions proposal will go a long way toward enforcing high-quality standards and improving the usability of ESG ratings.

The International Swaps and Derivatives Association (ISDA) welcome the opportunity to comment on the European Commissions proposal on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities.

On 13th June 2023, the European Commission presented a proposal for a regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities, as part of its renewed sustainable finance strategy, which was launched in 2021.

The latest call for evidence (June 2022) of the European Securities and Markets Authority (ESMA) confirmed that the market of ESG rating providers is very fragmented, with 59 providers being active in the EU. This fragmentation and proliferation results in a significant degree of heterogeneity in practices and methodologies as well as a low degree of comparability.

Executive summary DUFAS and its members welcomes the proposal for regulation on the transparency and integrity of ESG rating activities. ESG ratings and ESG data are important for asset managers. DUFAS and its members emphasize therefore the need for a well-functioning ESG ratings market that provides relevant, reliable, and comparable ESG ratings.

The Medef welcomed the Commission’s proposal for a regulation on the transparency and integrity of environmental, social and governance (ESG) rating activities. In addition to the need to foster sustainable investments recalled by the Commission, ESG ratings also help companies assess their value chain, the dynamics of which are increasing due diligence and due diligence requirements.

Filed in French · English published by the European Commission

AFG welcomes the proposal by the European Commission for a regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities and the opportunity to provide feedback. Indeed, the planned introduction of regulatory standards for ESG rating agencies and their rating activities appears suitable in a context where increased ESG integration in investment activities, including on…

EcoVadis endorses the intent of the European Commissions proposal to regulate the activities of environmental, social and governance (ESG) ratings providers. We welcome the introduction of regulation to improve the credibility of the ESG ratings sector - beyond its value-add in the financial sector.

The European Banking Federation welcomes the opportunity to respond to the Have Your Say on the European Commission's proposal for a Regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities. We share our views in relation to the proposal in attachment.

The European Commission has opened for feedback on the proposal for a period of 8 weeks (from June 15th to September 1st 2023). All feedback received will be summarised by the European Commission and presented to the European Parliament and Council with the aim of feeding into the legislative debate.

Environmental, social, and governance (ESG) considerations play a crucial role in asset managers' investment decisions for several reasons: Financial Impact. ESG factors can significantly affect a company's financial success and long-term viability, which in turn can impact investment returns. Investor Demand.

The European Association of Co-operative Banks (EACB) is the voice of the co-operative banks in Europe. It represents, promotes and defends the common interests of its 28 member institutions and of co-operative banks in general. Co-operative banks form decentralised networks which are subject to banking as well as co-operative legislation.

ENGIE welcomes and supports the draft European Regulation 2023/0177 which aims to improve the reliability, comparability and transparency of ESG ratings by introducing requirements for the methodological transparency of these ratings towards the public and customers, and by establishing a clear regulatory framework for the operation, governance and supervision of ESG rating agencies operating in the European Union.

Good quality ESG assessments are vital to support the transition to net-zero. LSEG is overall supportive of the Proposal which will allow for greater transparency in the market, without prescribing ESG assessment methodologies. This approach will contribute to a more effective allocation of capital to sustainable activities.

Assogestioni, the Italian asset management association, would like to express its full support to the European Commission with regards to the proposal of regulation ESG rating and would like to thank the EC for the opportunity to contribute to the development of said regulation.

The Association of Public Insurers welcomes the European Commission’s initiative to establish a legal framework for environmental, social and governance (ESG) ratings. As the second largest German primary insurer with a strong regional presence, the Group strongly supports the objective of a more sustainable economy.

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The importance of and need for credible and high-quality ESG ratings cannot be underestimated when it comes to ensuring an effective sustainable transition of society. In principle, ESG ratings can be just as important for the sustainable transition as traditional credit ratings are for the creditworthiness of different countries and financial institutions.

PensionsEurope welcomes the European Commissions proposal on ESG ratings. This legislation provides many solutions to current market shortcomings, such as enhancing transparency on methodologies and operations, regulating conflict of interests, establishing rules for third-country providers, and providing specific measures for smaller ESG providers.

AFMEs preliminary feedback aims to support the proposals objective to introduce transparency and governance requirements for ESG ratings providers aligned with the IOSCO recommendations. We highlight, from the perspective of bank and asset manager members as users, rated entities and regulated financial undertakings, that the scope of the proposal should not unintentionally capture products or activities of…

CDP welcomes the opportunity to provide feedback to the above-mentioned proposal and commends the efforts taken by the European Commission to support the transition to a more sustainable financial market. In brief: - CDP supports policy initiatives that are aligned to IOSCOs principles of transparency, good governance, management of conflicts of interest, and systems and control.

Dear Sir or Madam, The German banking industry committee (GBIC) would like to thank you for the opportunity to comment on the draft regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities. Please find attached our detailed remarks. Kind regards, [name removed] (on behalf of GBIC)

The Regulation, as proposed, is a step in the right direction in regulating the ESG ratings market and improve the quality of ratings but issues remain. We welcome that more transparency and reliability is being brought into the procedures regarding methodologies.

The attached document represents the response to the EC Consultation from EASRA, the newly formed European Association of Sustainability Rating Agencies. EASRA currently has 6 member firms, each of which is a provider of ESG ratings in the EU and beyond, and this submission represents the collective and agreed views of all member firms.

Creditreform Rating welcomes the proposal for a regulation of ESG Ratings. ESG Ratings play a major role in objectively and reliably informing capital market participants and other stakeholders on the sustainability of financial and non-financial companies.

Diligentia ETS (www.diligentia.it) is a non-profit association made up of businesses and professionals. It aims to promote the culture of social responsibility and sustainable development through a wide range of information and training services.

Filed in Italian · English published by the European Commission

Please find attached the Investment Association's response to the European Commissions proposals on the regulation of the transparency and integrity of Environmental, Social and Governance (ESG) rating activities. We hope you will find the views in the attached form helpful. The IA welcomes continued discussion with the Commission and relevant stakeholders on the regulation of ESG ratings and data providers.

Insurance Europe welcomes the EC proposal to improve the availability, integrity and transparency of environmental, social and governance (ESG) rating activities. The planned introduction of regulatory standards for rating activities should improve the quality of information on ESG ratings and address existing shortcomings in the ESG rating market.

The Association of the Luxembourg Fund Industry (ALFI) thank the European Commission for the opportunity to provide feedback on the EC proposal for a regulation on the transparency and integrity ESG rating activities. ALFI generally welcomes the proposed regulation. Nonetheless we would like to comment on particular aspects as follows.

BPCE group welcomes the proposed regulation of ESG ratings agency activities to enhance their transparency, integrity as well as their comparability and usability, which is essential for financial institutions and investors. of ratings and scoring. We are supporting its compatibility with IOSCO recommendations on the integration in a proportionate manner of third-country rating agencies.

BVI welcome the EU proposal for a Regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities which appears suitable for improving the quality of information on ESG ratings and addressing the existing shortcomings in the ESG rating market.

Advanced Impact Research GmbH (AIR) was founded in 2021 as a spin-off from the University of Hamburg. Since 2023, together with the non-profit association F.I.R.S.T., it has taken over, among other things, the independent review and assessment work for the FNG-Label, a leading quality label for sustainable investment funds.

The Danish Institute for Human Rights (the DIHR) welcomes the opportunity to provide feedback to the European Commission (EC) on its proposal for a regulation on the transparency and integrity of Environmental, Social and Governance rating activities (the ESG proposal).

ICAP CRIF RESPONSE Re: PROPOSAL FOR A REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL ON THE TRANSPARENCY AND INTEGRITY OF ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) RATING ACTIVITIES 2023/0177 (COD) ICAP CRIF S.A., a Credit Rating Agency (CRA) authorized since 2011 by ESMA, welcomes the initiative for the proposed Regulation referring to the transparency and integrity of Environmental, Social and…

As part of a collaborative submission between the Credit Rating Research Initiative, The Climate Finance Fund, and the Croatan Institute for the initial consultation, we had positioned a variety of issues in which the Commission may have been interested. In this follow-up, the Credit Rating Research Initiative alone would like to focus on one particular element which has emerged as being pertinent.

The Institute for Energy Economics and Financial Analysis (IEEFA) welcomes the opportunity to respond to the latest proposal to regulate Environmental, Social and Governance (ESG) rating activities. IEEFA is concerned that the proposed regulation fails to show coherence with the EU sustainable finance frameworknor does it explicitly uphold the principle of double materiality.

I represent the Scheme Owner, which in Italy has developed the Get It Fair GIF ESG Rating and Reporting Assurance Scheme (www.getit-fair.com). The programme aims to assess the level of exposure to current or potential risks of ESG events that may cause future adverse impacts to an organisation and/or its stakeholders.

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The German Insurance Association (GDV) welcomes the planned introduction of regulatory standards for ESG rating agencies and their rating activities. The proposals appear suitable to improve the quality of information on ESG ratings and to address shortcomings in the ESG rating market.

The Global Legal Entity Identifier Foundation (GLEIF) welcomes the opportunity to provide feedback to the European Commissions proposal for a Regulation on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities.

T&E welcomes the proposal put forward by the Commission to substantially improve the ESG ratings market in the context of the EU renewed sustainable finance strategy. However, T&E also considers that the significant improvement proposed in the governance and transparency of the sector is not enough to make it a reliable indication of sustainability.

Core Positions of the French and German Insurance and Asset Management Industry on the EU Commissions proposal for a regulation of ESG rating activities. We welcome the proposal by the European Commission for a regulation on the transparency and integrity of ESG rating activities.

Regardless of the overall positive opinion on this project, its purpose, form and expected effects, the European Financial Congress experts pointed out several risks associated with the introduced regulation and several proposed solutions.

The growth of the ESG market, fueled by investor demand for ESG data and efficiency, has created a diverse landscape of methodologies among ESG rating providers. In this context, as DHL Group, we value the Commission's proposal to enhance transparency and requirements for ESG ratings. However, while we welcome this step, certain concerns persist due to the absence of streamlined methodologies in the proposal.

Eumedion, representing the interests of institutional investors with a long-term investment horizon and collectively with a more than 8 trillion global investment portfolio, welcomes the European Commissions efforts to increase the transparency and integrity of the ESG ratings market.

With the recent publication of a proposal on ESG ratings and sustainability risks in credit ratings, the European Commission aims to tackle the eagerly debated issue of the consistency, quality and usefulness of ESG ratings. Indeed, in the past few years, a consensus has emerged on the need to better regulate ESG ratings .

RepRisk endorses the proposal for a regulation of ESG ratings providers by the EU in particular its focus on increased transparency on ratings methodologies and avoiding conflicts of interest within providers business activities. However, RepRisk opposes the proposal for cost-based pricing models as it stifles innovation which is one of the key levers to attain a sustainable future.

The Swedish Securities Markets Association (SSMA) notes the importance of Providers being resourced to interact with users of ESG ratings as well as the companies being rated. It may be difficult to establish contact with analysts at Providers when published information is factually incorrect, a problem made worse where Providers are not acquainted with the way societies in the EU or in a particular EU country…

ESG ratings have become established on the capital market, which make it their business to evaluate the sustainability performance of companies. The ratings often form the basis for investment decisions by sustainability-oriented investors to select suitable securities. In addition, the ESG ratings are used as a basis for compiling company values for sustainability indices.

Deutsches Aktieninstitut has followed the debate ahead of the proposal very closely from the perspective of German listed companies. It is well known that as a consequence of investors interests and needs, ESG factors and ESG ratings have become increasingly relevant for access to finance and costs of finance of companies in Europe.

Norges Bank Investment Management is the investment management division of the Norwegian Central Bank (Norges Bank) and is responsible for investing the Norwegian Government Pension Fund Global. NBIM is a globally diversified investment manager with 12,429 billion Norwegian kroner, or around 1,186 billion EUR, at year end 2022.

The Jean Monnet Chair "EU Budgetary Governance & Audit" at the University of Macedonia (Greece) and the Association of Certified Fraud Examiners-Greece Chapter (ACFE Greece) welcome and support the effort by European Commission to set standards that will embed principles of integrity and transparency into the activities of providers of ESG ratings operating in the EU, aiming to prevent situations of conflict of…

First of all, the European Savings and Retail Banking Group (ESBG) welcomes this consultation as well as the possibility given by the Commission to provide feedback on its proposal for the regulation on the transparency and integrity of ESG rating activities. ESBG would like to stress its commitment to sustainability and its support when it comes to fighting greenwashing.

maki Consulting sees improving the reliability and comparability of ESG ratings as a highly relevant aim at EU level (and beyond), given the complete lack of comparability and the heterogeneity of the reliability of the ratings.

As an expert research institution with more than 30 years of experience investigating the impacts of multinational companies, The Centre for Research on Multinational Corporations (SOMO) considers that there is, within the European Commission’s proposals, a fundamental misunderstanding about how ESG rating can contribute the objectives of the European Green Deal.

PwC International Ltd (PwC), on behalf of the PwC network, welcomes the European Commission’s initiative to improve the quality and transparency of ESG ratings and sustainability risk in credit ratings. Please find attached our response to the call for evidence.

ESG Rating Methodology If companies are rated based on publicly available information, methodologies for assessment of the information should also be public. There should be standardized metrics and clearly defined requirements, so that benchmarking is reliable.

The Caisse des Dépôts Group is the French long-term investor dedicated to the general interest, major financing actor of sustainability in France with a long-standing commitment to responsible investment. CDC and its subsidiaries both use and are covered by ESG rating in particular because CDC Group financing policy is firstly driven by the integration of ESG factors and long-term commitment.

>>Challenges: GISAD welcomes the intention of the EU Commission to develop and standardise ESG ratings. Already in 2017, GISAD proposed in its policy statement at https://gisad.eu/wp-content/uploads/2021/08/taking-the-economy-and-society-into-the-digital-transformation.pdf to introduce a key figure on societal structural relevance.

Recognising the impact and growing importance that ESG Rating Agencies have on the market, particularly when it comes to investment decisions, Ryanair believes further regulation is needed to manage this burgeoning industry. Therefore, Ryanair calls on the Commission to establish clear, enforceable and unambiguous regulation governing ESG Rating Agencies.

The Global Legal Entity Identifier Foundation (GLEIF) is pleased to provide comments to the European Commission's Initiative titled ESG ratings and sustainability risks in credit ratings. GLEIF will focus its comments on using the Legal Entity Identifier (LEI) as a data element in ESG reporting to increase ESG rating transparency at the entity level and facilitate comparability of ESG data exchange.

The regulation should introduce a definition of ESG rating and clearly divide the information included in each pillar (E, S, G) to support comparability/transparentity of ratings ESG rating agencies should be licensed and supervised (by ESMA) at European level, as should credit agencies ESG credit rating agencies should publish a detailed description of the methodology they use; the methodology should indicate the…

Filed in Polish · English published by the European Commission

The text stipulates transparency, independence and integrity in the credit rating process. Like financial information, the data underlying the ESG credit rating process must also be transparent (source), independent (provided by a third party) and integrative (qualified and certified data).

Filed in French · English published by the European Commission

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